“Fed Chairman Ruml got it right in 1946”

Hat tip Warren Mosler’s blog (http://www.moslereconomics.com/)

On his recent piece “Taxes For Revenue Are Obsolete ” that appeared on the Huffington Post he notes:

April 15th has come and gone, but the issue of taxation remains the course de jour. I was recently forwarded an article entitled Taxes For Revenue Are Obsolete, written in 1946 by Beardsley Ruml, the former Chairman of the Federal Reserve Bank of New York and published in a periodical named American Affairs. While Ruml was writing about the merits of corporate taxes, it is his discussion about how the function of taxes changed after the nation exited the gold standard that make this a must read. As Ruml’s stated, with an “…inconvertible currency, a sovereign national government is finally free of money worries and need no longer levy taxes for the purpose of providing itself with revenue… It follows that our Federal Government has final freedom from the money market in meeting its financial requirements… All federal taxes must meet the test of public policy and practical effect. The public purpose which is served should never be obscured in a tax program under the mask of raising revenue.” He goes on to explain how, with Federal spending not revenue constrained, the first function of taxation is to regulate the value of the dollar, which we know as regulating inflation. The notion of the Federal government ‘running out of money’ and ‘dependence on foreign borrowing’ as well as ‘sustainability’ is categorically inapplicable. The operative CBO ‘scoring’ is the inflationary effect, rather than simply a revenue forecast. And while Social Security and Medicare may turn out to be inflationary, they are not ‘bankrupting the nation’ as most believe, including a Democratic Congress that cut Medicare spending with the recent health care bill and has all entitlements ‘on the table.’

See also here.

3 responses to ““Fed Chairman Ruml got it right in 1946”

  1. I don't agree with this much at all. The income tax was an excise measured by income on the act of doing business. There were to be no direct taxes in the United States that weren't apportioned. Corporations derive certain benefits of being corporations, the main one to be able to hide behind the corporate charter with limited liability. In this day and time, leaving money in the corporation would do nothing but leave more for Wall Street, corporate raiders and management to embezzle. FDR and Woodrow Wilson adopted policies which led to the corporation being king of the economy and the creation of unlimited debt which has now placed the country in debt equal to nearly 4 years income. I do agree somewhat about the estate taxes, but I think the rates should be adjusted to what is rich and the tax more gradual, the higher rates covering only what is considered wealthy and adjusted to inflation. At the present, we are still using the tax rates devised decades ago when a home cost $20,000, a car $3000 and a college education maybe $10,000. The price of all have gone up 10 times. The corporate state has and is destroying freedom in the US and making the middle class poorer. Look at the animals that have grown up on Wall Street since they went public. Prior to going public, most of these firms would never dream of the actions they have taken over the past 20 years or so. They gamble with shareholders money and hide behind the corporate veil. Recent rulings on Pfizer on how they have marketed their drugs, in many cases for purposes where no research confirmed the use and in manners that were dangerous. The corporate state covered their ass and the corporate veil kept some out of prison.

  2. Hello? What happened in Greece?

  3. Greece don't have it's own money. Is it that hard to understand?